Uber Loses as New York Becomes First Major US City to Cap Ride-Hailing Drivers

Yesterday, New York City took a big step toward regulating Uber, Lyft and other ride-hailing companies. The city council passed legislation that will cap the number of for-hire vehicles in addition to a bill that will create a minimum pay rate for drivers.

It's huge blow to ride-hailing companies in one of the most profitable US markets. New York was becoming inundated with for-hire vehicles, with the number of cars growing drastically over the last few years. In 2015, the last time similar legislation was proposed, there were 63,000 for-hire drivers — thats now ballooned to more than 100,000.

Many city officials blame the services for the increasing traffic gridlock in Manhattan. The MTA, which oversees NYC's public transit, has also seen a serious decline in ridership over the last few years. It's unclear if that has something to do with the increased availability and convenience of ride-hailing services or the deplorable mismanagement the city's subway system.

"We are pausing the issuance of new licenses in an industry that has been allowed to proliferate without any appropriate check or regulation," City Council speaker Corey Johnson said, according to The New York Times.

Uber and Lyft opposed the legislation saying it would lead to higher prices, longer wait times and fewer transportation options for New Yorkers, especially for those who don't have easy access to public transit.

"These sweeping cuts to transportation will bring New Yorkers back to an era of struggling to get a ride, particularly for communities of color and in the outer boroughs," Joseph Okpaku, a vice president at Lyft, said in a statement.

The law will only pause the issuance of new licenses for one year (with the exception of wheelchair-accessible vehicles) and the city's taxi commission has the ability to issue new licenses if it sees a real need for it. The city will study the impact of ride-hailing vehicles during the year-long hiatus.

"More than 100,000 workers and their families will see an immediate benefit from this legislation," said New York City Mayor Bill de Blasio. "And this action will stop the influx of cars contributing to the congestion grinding our streets to a halt."

Driver pay has been brought to the forefront after six for-hire drivers committed suicide in recent months, with some of them citing financial troubles as to why they took their own life. Studies show that ride-hailing vehicles sit empty in New York about 40% of the time while they are working.

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Because Uber drivers are considered independent contractors, they don't qualify for a minimum wage, but the new law will establish a "floor" for what drivers can earn. Quartz reports that a formula created by economists James Parrott and Michael Reich will likely be implemented by the city. It "adjusts drivers' pay based on how much work they get overall, with the goal of paying them $17.22 an hour, or $15 an hour after expenses like gas."

Critics say that the cap won't fix the traffic problem with many suggesting congestion pricing in place, a solution backed by New York Governor Andrew Cuomo.

The debate took on many aspects, including a racial one. Civil rights advocate Reverend Al Sharpton said that the legislation will make it harder for people of color to get a ride, arguing that yellow cab drivers already discriminate against minorities.

The legislation will take effect immediately once Mayor de Blasio signs the new law. The regulation may also serve as a framework for other cities to slow down ride-hailing companies explosive growth.